There are a growing number of Australian angel investors open to investing in start-ups. The way we’ve met a number of them is through personal and business networks but Sydney Angels is a collective group of Sydney based angel investors so that group is worth getting in touch with.
The Australian venture capital industry is still very small compared with the same industry in Europe and particularly the US.
From our limited experience the two most experienced firms in the space are Starfish Ventures based in Melbourne and Southern Cross Venture Partners with offices in Sydney and Silicon Valley.
The primary thing a venture capital firm can bring to your business is of course capital, but the partners of both Starfish and Southern Cross have significant entrepreneurial experience themselves so can be helpful in thinking through potential paths for the growth of your business.
One of the downsides of raising money via a VC firm is that they’ll tend to have more restrictive requirements than the previous five options.
They’ll want a board seat, liquidation preferences, anti-dilution protection and a range of other similar clauses.
For a great series of posts discussing the terms generally included in a venture capital term sheet check out this great blog post series from Brad Feld.
We were fortunate that early on in the life of Shoes of Prey we were a finalist for the ‘Best Bootstrapped Startup’ in their 2009 Crunchie Awards.
Following on from these awards we were contacted by a large number of US venture capital firms and we met either over the phone or in person with around 10 of them.
The conclusion we came to with all of them is that they’re very open to investing in Australian businesses, however for businesses based outside the US they’re generally looking for the business to be worth $20m+ before they’ll invest.
When they work with smaller start-ups they require them to be based in the US so they can work more closely with them.
One of the VC firms we met with a couple of times was Accel Partners and we’ve seen them put this philosophy into action with investments in Atlassian, OzForex and most recently 99Designs, all at $50m+ valuations.
While it might not be quite as easy for an Australian start-up to raise capital when compared with our US friends, there are a range of good options available to us.
And if none of them offer exactly what you’re looking for you can always take the same approach as we have with Shoes of Prey, and self-fund your business out of your own savings and business cash flow.
Are there any other options for raising capital that you’ve come across?
